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Cal -Am Water Rate Update January 24, 2017 Page 2 Table 1 Water Purvevor Services Purveyor No. of Services % City Served Cal -Am 20,700 46 City 17,100 38 Cal Water 7,500 16 Totals 45,300 900 Water rates for customers within the City's water service area are approved by the City Council and must be in compliance with Prop 218, including a protest ballot process. Cal -Am and Cal Water are private "investor owned utilities" and, as such, are regulated by the California Public Utilities Commission (CPUC). Water rates for customers of these companies are approved by the CPUC through a three-year General Rate Case (GRC) process, and are not subject to Prop 218. On July 1, 2016, Cal -Am filed an application with the CPUC for a GRC to increase water rates for its many California systems, including their Thousand Oaks system, for 2018, 2019, and 2020. The GRC process is expected to take several more months, with final rate approval this Fall. The GRC proposes rates for an option to consolidate several separate water systems in Southern California, as well as a non -consolidation (stand-alone) option. The consolidation option proposes combining five separate systems in Ventura County, Los Angeles County, and San Diego County — a huge geographic area for rate setting purposes. These separate systems are unique in that each obtains water from different sources (imported vs. ground water) and each is comprised of different infrastructure of varying complexity, age, as well as operations and maintenance needs. Consolidating allows capital from one area to be spent on infrastructure improvements in a service area potentially 100 miles away. Cal-Am's GRC application is not clear how City residents will benefit from consolidation. DISC USSIONlANALYSIS: The water rate increases proposed by Cal -Am vary significantly between the consolidation and stand-alone options (Attachment #2 – proposed residential rate adjustments). For Cal-Am's Thousand Oaks service area, cumulative three-year water rate increases for the consolidation option totals 32.5 percent, but only 15.3 percent for the stand-alone option. Note that these figures do not include higher imported water costs expected to be passed on from Calleguas, estimated to be an additional three percent per year. This is because CPUC rules allow Cal -Am to simply "pass through" higher imported water costs via a very simple "advice letter" approval process, which does not require any public input. For comparison, City rates were raised last year by three percent per year (without imported water increases), and Cal Water raised its rates by one percent per year (without imported water increases).